Writing Assignment 2

The table above shows Ron’s marginal utility from sandwiches and eggs.

​ (i) What is her total utility from purchasing 3 eggs?

​ To find Ron's total utility from purchasing 3 eggs, we sum up her marginal utility from
eggs for the given quantity:
​ Total Utility = Marginal Utility from Eggs (for 1 egg) + Marginal Utility from Eggs (for 2
eggs) + Marginal Utility from Eggs (for 3 eggs)
​ Total Utility = 10 + 8 + 6 = 24
​ So, her total utility from purchasing 3 eggs is 24.
​
​ (ii) Ron’s weekly income is $11, the price of a sandwich is $2, and the price of an egg is
$1. What quantity of sandwiches and eggs will maximize Ron’s utility if he spends his
entire weekly income on sandwiches and eggs? Explain your answer using marginal
analysis. Using marginal analysis, Ron should start by consuming eggs until the marginal
utility per dollar for eggs is equal to the marginal utility per dollar for sandwiches. This
occurs when he consumes 2 eggs.
​ After consuming 2 eggs, Ron should switch to sandwiches, as the marginal utility per
dollar for sandwiches becomes higher than for eggs.
​ Therefore, Ron should consume 2 eggs and 2 sandwiches to maximize his utility given
his budget constraints. This combination provides the highest total marginal utility per
dollar spent.
​

Question 2: Ch 10: Elasticity

You own a small-town movie theatre. You currently charge $5 per ticket for everyone who comes
to your movies. Your friend who took an economics course in college tells you that there may be
a way to increase your total revenue. Given the demand curves shown, answer the following
questions.

i) What is your current total revenue for both groups?

Total current revenue ADULT: 250

Total current revenue CHILD: 100

Total revenue: 350

ii) The elasticity of demand is more elastic in which market?

The elasticity of demand is more elastic in the child market

iii) What is the elasticity of demand between the prices of $5 and $2 in the adult market? Is this
elastic or inelastic?

[(P2-P1)/P1] x 100 =

(2-5)/5 x 100 = -60

[Q2-Q1)/Q1] x 100= 50

ED= 50/-60= -0.833

Making the elasticity of demand between the prices of 5 and 2 in the adult market INELASTIC
iv) What is the elasticity of demand between the prices of $5 and $2 in the children's market? Is
this elastic or inelastic?

Change in price= -60

(20-40)/40 x 100= -50

-50/-60= 0.833

The elasticity of demand between the prices of 5 and 2 in the children's market is inelastic

v) increase the price of adult tickets to $8 each and lower the price of a child's ticket to $3. How
much could you increase total revenue if you take his advice?

8x40=320

3x40=120

320+120=440 which is 90 dollars more than if you were to sell both tickets at the same price of 5
dollars each to either market.

You would increase your total revenue by 90 dollars if you were to take his advice.
Question 3: Ch 4: consumer and Producer Surplus

1) Suppose that the market below represents the demand and supply of food service workers on
the Ramapo College campus. That is, consumers are the food service employers, and producers
are the food service workers. The price is the hourly wage, and the quantity is the number of
hours worked per week. Assume that the market is perfectly competitive and satisfies all other
conditions for the free market equilibrium to be efficient.

i) What is the lowest wage that workers are willing to accept for the 40th hour of work?

The lowest wage that workers are willing to accept for the 40th hour of work would be 6

ii) What is the highest wage that employers are willing to pay for the 40th hour of work?

The highest wage that employers are willing to pay for the 40th hour of work is 16.

iii) Find the market equilibrium quantity of hours and the equilibrium wage.
The market equilibrium quantity of hours and the equilibrium wage are 90 and 11.

iv) What is the Consumer Surplus in the market equilibrium? Identify the Consumer Surplus on
the graph.

The consumer surplus in the market equilibrium is 9

v) What is the Producer Surplus in the market equilibrium? Identify the Producer Surplus on the
graph.

The producer surplus in the market equilibrium is 8.

vi) What is the Total Surplus in the market equilibrium?

The total surplus in the market equilibrium is 17.

vii) What happens to Total Surplus if Ramapo College decides to impose a minimum hourly
wage of $14 per hour? You do not need to do any calculations to answer this question. Answer
using your intuition.

If Ramapo college decided to impose a minimum hourly wage of 14 dollars per hour the
total surplus would increase due to the raised hourly wage.